PBOC's Yi Pledges More Open Financial SectorBloomberg News
Yi makes first formal public remarks after being appointed
Says SOE leverage, local government debt deserve attention
People’s Bank of China Governor Yi Gang said the nation will further ease access to its financial sector and coordinate the opening with currency reforms.
China will open the capital account in an “orderly” way and improve the yuan’s convertibility, the newly-appointed central bank governor said Sunday in Beijing. Yi also said that monetary policy will remain “prudent and neutral,” repeating the central bank’s recent stance, and pledged to continue work on defusing financial risks and enhancing regulatory capabilities.
“The more open a sector, the more competitive it is,” Yi said in a speech to the China Development Forum. “Less-open sectors tend to be backward and they’ll see risks accumulating,” he said. He added that “a series of reforms will be rolled out to ease market access in the future,” without specifying further.
The comments were Yi’s first in public after being appointed this month to succeed Zhou Xiaochuan as central bank governor. He inherits an institution with growing influence at home and abroad, as well as an economy with a growing stock of debt.
China has set its target for economic growth at around 6.5 percent for this year, and slashed its budget deficit target to 2.6 percent of economic output from 3 percent. The move is seen as an attempt to ensure the economy shifts toward higher-quality output while policy makers focus on taming leverage growth.
The high leverage ratio at state-owned enterprises, hidden local government debt and rapid growth of household leverage “all deserve attention,” Yi said as he listed potential financial risks to the economy.
“The rapid increase of irregular shadow banking has been curbed but the outstanding amount is still large,” he said. “Some institutions conducted illegal financial business without a financial license, and some illegal financial activities expanded rapidly under guise of innovation,” he said, also noting potential cross-agency, cross-market, cross-sector contagion in financial holding groups.
He didn’t elaborate further, but added that policy makers will stabilize macro leverage and accelerate financial regulatory rules to rein in the risks.
— With assistance by Yinan Zhao, Dingmin Zhang, Kevin Hamlin, and Xiaoqing Pi